In two significant legal developments shaping the cryptocurrency landscape, a US court has overturned sanctions against the Tornado Cash privacy protocol, while Coinbase has filed a motion to dismiss a lawsuit from BiT Global over the delisting of wrapped Bitcoin (wBTC).
Coinbase Files Motion to Dismiss BiT Global Lawsuit Over wBTC Delisting
In a pivotal legal development, Coinbase, the prominent US-based cryptocurrency exchange, has filed a motion to dismiss a lawsuit brought against it by BiT Global. The lawsuit, filed in December 2024, stems from Coinbase’s decision to delist wrapped Bitcoin (wBTC), a move that has drawn significant attention within the cryptocurrency industry. The motion, submitted on Jan. 21 to the US District Court for the Northern District of California, highlights Coinbase’s concerns about wBTC’s custodial control and its affiliation with controversial Tron founder Justin Sun.
Coinbase announced in November 2024 that it would suspend wBTC trading starting Dec. 19, 2024, citing potential risks tied to the token’s control. BiT Global, a key player in the cryptocurrency market, responded with a lawsuit on Dec. 13, claiming that Coinbase’s actions harmed the wBTC market. The lawsuit alleged that the exchange’s decision to delist wBTC disrupted market stability and caused financial damage to BiT Global.
However, Coinbase’s legal team has defended the decision, asserting that the move was necessary to mitigate potential risks associated with BiT Global’s new partnership with Justin Sun. According to court documents, Coinbase expressed concerns that “control of wBTC would fall into the hands of Mr. Sun,” whom US authorities have targeted in legal complaints related to alleged fraudulent activities.
Coinbase’s motion to dismiss the lawsuit is built on multiple legal arguments. The exchange’s lawyers argued that the lawsuit fails to establish the fundamental elements necessary for the case to proceed. Specifically, Coinbase claimed that:
Market Power: BiT Global conceded its own market dominance in the complaint, undermining any claim that Coinbase’s actions constituted exclusionary conduct.
Exclusionary Conduct: The motion argued that Coinbase’s decision to delist wBTC was not exclusionary but rather a risk-mitigation measure based on legitimate concerns.
False Statements: Coinbase refuted any allegations of making false statements in connection with the delisting decision.
Injury: BiT Global allegedly failed to demonstrate any tangible injury that could be directly attributed to Coinbase’s actions.
“The Court should dismiss BiT’s complaint in full,” Coinbase’s filing read. “And it should do so with prejudice, as the most fundamental of these pleading failures … cannot possibly be cured.”
The filing further emphasized that Coinbase’s decision was grounded in protecting its platform and users, particularly in light of the August 2024 announcement that wBTC’s custodian, BitGo, had entered a partnership with BiT Global and Sun.
The case has sparked debate over the accountability and decision-making authority of centralized cryptocurrency exchanges. BiT Global’s lawsuit also reflects broader concerns among token issuers and market participants about the potential market impact of delistings by major exchanges like Coinbase.
In December, a judge declined to issue a restraining order that would have prevented Coinbase from delisting wBTC.
Adding to the complexity of the case is Coinbase’s ongoing legal battle with the US Securities and Exchange Commission (SEC). Filed in 2023, the SEC’s lawsuit against Coinbase centers on alleged regulatory violations and has been stayed pending an appeal to the Second Circuit. Meanwhile, Coinbase has been actively lobbying for regulatory clarity in the US to establish clearer guidelines for crypto firms.
The Role of Justin Sun
Justin Sun’s involvement in the case adds a layer of controversy. The Tron founder has faced several legal challenges in the US, including allegations of market manipulation and unregistered securities offerings. His partnership with BiT Global in managing wBTC’s reserves appears to have been a key factor in Coinbase’s decision to delist the token. Coinbase raised concerns that Sun’s control over wBTC could pose an “unacceptable risk” to its platform and users.
The US District Court is scheduled to hear Coinbase’s motion to dismiss on April 3, 2025. The outcome of this hearing will likely have significant implications for both Coinbase and the broader cryptocurrency market. A dismissal with prejudice would affirm exchanges’ ability to delist tokens without extensive legal repercussions, while a decision in favor of BiT Global could set a precedent for challenging exchange delistings.
As of now, BiT Global has not issued a public response to Coinbase’s motion.
US Court Overturns Sanctions Against Tornado Cash, Signaling Shift Toward Privacy-Friendly Crypto Regulations
In related news, the US District Court for the Western District of Texas has overturned the sanctions imposed on Tornado Cash, a cryptocurrency mixing protocol that has been at the center of legal and regulatory battles. The decision, issued on Jan. 21, 2025, could mark a pivotal moment for the future of privacy-preserving technologies in the cryptocurrency industry.
The US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in August 2022, accusing it of being a tool for laundering funds tied to illicit activities. The sanctions specifically highlighted the protocol's alleged role in enabling the North Korean Lazarus Group to launder over $455 million in stolen digital assets.
These sanctions set off a cascade of legal challenges, including the arrest and subsequent conviction of Tornado Cash developer Alexey Pertsev. Dutch judges at the s-Hertogenbosch Court of Appeal found Pertsev guilty of laundering $1.2 billion in illicit assets through the protocol and sentenced him to five years and four months in prison in May 2024. However, the sanctions also drew criticism from privacy advocates and the broader crypto community, who argued that the government’s actions targeted open-source technology rather than the perpetrators of illegal activities.
The recent ruling by the US court invalidated the sanctions imposed by OFAC, a move that could set a precedent for how privacy-focused blockchain protocols are treated under US law. According to the court filing, the judgment stated, “It is ordered and adjudged that the judgment of the district court is reversed, and the cause is remanded to the district court for further proceedings in accordance with the opinion of this court.”
This ruling follows an appeal filed on Nov. 26, 2024, by six Tornado Cash users who challenged OFAC’s authority to sanction the protocol. The plaintiffs argued that OFAC had exceeded its statutory authority by blacklisting Tornado Cash. They contended that the protocol’s immutable smart contracts—software code designed to enhance privacy—do not constitute “property” under the International Emergency Economic Powers Act (IEEPA). Therefore, they argued, these smart contracts could not legally be blocked.
The appeal also highlighted the necessity of privacy tools for cryptocurrency users, pointing out that blockchain transactions, while publicly accessible, are inherently traceable. The plaintiffs emphasized that privacy is an essential feature for certain legitimate financial transactions.
Critics of the sanctions argue that OFAC’s actions raised significant concerns about the future of privacy-preserving technologies. The court’s ruling may encourage more innovation in privacy-enhancing technologies, as it challenges the narrative that privacy equals criminality.
Alexey Pertsev’s Ongoing Legal Struggles
Despite the overturned sanctions, Tornado Cash developer Alexey Pertsev remains in custody. During his trial in March 2024, Pertsev argued that he could not be held responsible for the illegal actions of users who utilized the protocol. However, the court rejected his defense, stating that the Tornado Cash team could have implemented additional safeguards to prevent misuse.
The case against Pertsev has intensified debates about the accountability of developers in the decentralized finance (DeFi) space. Critics argue that holding developers liable for how their open-source software is used sets a dangerous precedent for innovation, particularly in privacy-preserving technologies.
The reversal of the Tornado Cash sanctions has sparked optimism among cryptocurrency advocates, many of whom view the decision as a win for innovation and privacy. However, it has also reignited concerns about regulatory clarity and the fine line between protecting user privacy and preventing illicit activity.
The court’s decision is likely to influence ongoing discussions about the role of privacy in the cryptocurrency space. While the reversal of sanctions represents a victory for Tornado Cash, it also signals a shift in how regulators and courts may approach privacy-preserving technologies in the future.
The focus now turns to Alexey Pertsev’s legal case, as the crypto community watches to see whether the outcome of his trial will further shape the legal landscape for blockchain developers. Additionally, the ruling raises questions about how governments will handle similar protocols and technologies moving forward.
As the case continues to unfold, the decision to overturn the sanctions against Tornado Cash is being hailed as a significant step toward fostering a more innovation-friendly regulatory environment for privacy-focused technologies. However, it also serves as a reminder of the challenges the industry faces in balancing privacy, compliance, and security.
